🏦 U.S. Treasury Yield Curve

The treasury yield curve is a plot of the annualized interest rates for a given length of debt in the form of U.S. treasury bills, notes, and bonds. A person can lend (i.e. invest) money to the U.S. government through the purchase of these securities and expect to receieve interest (yield) in return. For example, a 1-year treasury bill may provide 1.1% interest rate, netting the owner $11 for a $1000 investment. This may seem like very little return, but can be conidered almost "guaranteed" profit as it is backed by the U.S. Government. In fact, the financial term Risk Free Rate is often equated to the return on a 3-month treasury bill.

U.S. Treasury-backed securities have different names according to the duration of lending:

• Bills - 4-52 weeks (up to 1-year)

• Notes - 2-10 years

• Bonds - 20-30 years

Keeping track of the U.S. treasury yield curve is interesting because it helps inform investors where to allocate their money for short-, mid-,or long-term growth. Treasury-backed securities are considered a "safe" investment so returns are considered almost-guaranteed. Yields on U.S. backed securities fluctuate based on a number of macroeconomic factors but are a reflection of "general market sentiment" and the current Fed Funds Rate. 

Generally, U.S. treasury interest rates are far too low to be attractive for investors, so they typically seek out larger returns by allocating their money elsewhere, such as the stock market, commodities, or other investable assets. However, if yields for short duration U.S. treasuries are high enough, an investor may be incentivized to reallocate money from their other investments and loan their money to the U.S. government instead, since returns are almost guaranteed.

Thus, the "shape" of the yield curve can be considered an indicator of economic health or production output and is best explained in the link here: https://www.investopedia.com/terms/y/yieldcurve.asp#toc-types-of-yield-curves